Sunday, May 26, 2024
HomeBusinessLow Market Confidence Stagnates Economy

Low Market Confidence Stagnates Economy

Low confidence on the market is likely to slow down economic performance for 2018 with key macro-economic indicators already pointing to a recession, economic experts have warned.

Already, Finance and Economic Development Minister Mthuli Ncube has adjusted economic growth projections from the 6.3 percent earlier projected under the Transitional Stabilization Program (STP) to 4 percent.

The market is reeling from unrelenting inflation, foreign exchange distortion and shortages of key economic commodities such as fuel.

Economic analyst, Victor Bhoroma believes the impact of low confidence on the market is proving too costly for the beleaguered economy.

“Zimbabwe’s economy wobbles on the brink of recession; the cost of low confidence in the market is taking a huge toll on various policies to resuscitate the economy. Prices for most consumer food staffs, industrial products and services have been skyrocketing since the October 2018 Monitory Policy Statement with official inflation rate eclipsing 66.8 percent in March 2019,” said Bhoroma.

Owing to market uncertainty, most Zimbabweans are investing beyond the country’s borders due to fear of losing assets value in the local market.

Central Bank statistics attest to this. In 2018 the RBZ highlighted that funds held by Zimbabweans in offshore banks rose by more than US$ 1 billion at a time direct investment into the country was very minimal.

ALSO ON 263Chat:  Delta Launches Chibuku Super Banana Flavour

Observers fear the waning confidence levels in the market will continue during the course of the year, and the International Monetary Fund has already raised the red flags.

“Zimbabwe is facing deep macro-economic imbalances, with large fiscal deficits and significant distortions in foreign exchange and other markets, which severely hamper the functioning of the economy,” read a recent IMF statement after the completion of the second staff monitoring program.

While Finance minister Mthuli Ncube and the Central Bank Governor Dr John Mangudya have continued to draw fiscal and monetary policy levers to stimulate the economy, little has been done to build confidence for business, consumers and investors.

Notably, the foreign exchange question remains the big elephant in the room and despite liberalizing its trading on the inter-bank foreign exchange market at 2.5 RTGS Dollar is to 1 US Dollar, a rate widely seen as too modest by any means, there remains massive variance between the interbank market and the parallel market one.

This has been the major drawback for the interbank foreign exchange market success.

But to restore confidence it requires strong institutions devoid of corruption, policy consistencies and sound economic planning, Bhoroma says.

“A severe confidence shortfall is costing Zimbabwe billions each year and restoring it in local institutions requires political commitment to fix what is broken. A confidence deficit in Zimbabwe has demonstrated that it has disastrous consequences to the economy just as a budget deficit or trade deficit. It will take real reforms in terms of governance to bring back lost confidence in the economy,” he added.

ALSO ON 263Chat:  New Dawn for CocaCola, As New Regional Manager Steps In

The country’s public institutions remain highly opaque for public scrutiny and despite the Auditor General’s Office unearthing massive misappropriation of public funds in the past, little has been done to bring offenders to book.

Share this article

No comments

Sorry, the comment form is closed at this time.

You cannot copy content of this page